Question

Treadwell Advisors, Incorporated, follows GAAP and uses the Accrual Method of Accounting. During July, the corporation had the following transactions: Cash received for services rendered to Jon Booker $40,000 Provided services to Mike Nguyen on credit $10,000 Received proceeds of loan from Second Chemical Bank $30,000 Sold common stock $50,000 Paid expenses $25,000 What amount of revenue will this corporation report for July on their Income Statement? O $70,000 O $120,000 $50,000 O $$95,000

Answer 1

Treadwell advisor,

In the instant case revenue includes only cash received for service rendered to John booker and provided services to Mike nguyen on credit.

Proceeds from loan and proceeds from common stock are financial activities not operating activities hence they don't come under revenue definition and obviously expenses are not under this definition. accrual method of accounting considers either cash transaction or credit transaction.

So, revenue would be $ 50,000 (40,000+10,000), hence, option "c" is correct.